How 529 College Savings Plans Work

Products

/getmedia/e6f353b7-295b-49e4-9302-09af259985b1/news-family-financial-planning-lrg.jpg?width=1200&height=500&ext=.jpg

5.26.23

How 529 College Savings Plans Work

The best thing to happen to college savings in the last several years is the 529 plan, a tax-advantaged savings plan for a child or grandchild to pay for qualified education costs.

How the Plans Work

Once on the 529 plan, assets build up tax-free until they're withdrawn. Withdrawals from state 529 plans will be tax-free if the money is used to pay for qualified education costs. A few common qualified education expenses include:

  • Tuition (K-12 and College)
  • Books and supplies
  • Computers and software
  • Room and board
  • Student loan repayment

Tax Advantages

There is no up-front federal tax deduction for money put in a 529 plan, although some states allow you to deduct contributions on your state tax return. Money builds up tax-sheltered until withdrawn to pay tuition or other educational expenses. Withdrawals from state 529 plans are completely tax-free.

Gift Tax Benefit

The normal limit on tax-free gifts is $17,000 per gift per year. Section 529 allows you to bunch five years of tax-free gifts into one year. Each donor can give $85,000 tax-free to fund a 529 plan—$170,000 in total from a married couple—every five years.

Interested in the potential of a 529 plan? Provident offers a full range of Investment and Retirement Planning services. Seek the guidance of a Provident Financial Consultant233 by calling (800) 656-4096.

Disclosures

  • 233) Financial Consultants are employees of Provident Credit Union and registered representatives of Securities America, Inc.

    Registered Representatives offer securities through Securities America, Inc. (Matthew Agius, Scott Pederson, Chad Franklin, John Dayao, Sneh Jolly) member FINRA, SIPC. Advisory services offered through Securities America Advisors, Inc. (Matthew Agius, Scott Pederson, Chad Franklin, John Dayao, Sneh Jolly). Provident Credit Union and the Securities America companies are separate entities. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed.

    Not NCUA Insured — No Credit Union Guarantees — May Lose Value

    Offices of Securities America are located in certain branches of Provident Credit Union and offer products and services by agreement. These are not products and services of Provident Credit Union; are not insured by any Federal agency and are subject to investment risks, including possible loss of principal invested.